Market Overview

The AI Theme Is Outperforming In This ETF


On its own, the artificial intelligence (AI) and robotics investment theme offers plenty of excitement. Aggressive traders can boost the thrills with this theme with the Direxion Daily Robotics, Artificial Intelligence & Automation Index Bull 3X Shares (NYSE: UBOT).

What Happened

UBOT, the only leveraged AI and robotics exchange-traded fund, gained about 1.30 percent Tuesday, pushing its April gain to 22 percent. That put UBOT in the upper echelon of Direxion's leveraged bullish ETFs in terms of April gains.

UBOT tries to deliver triple the daily returns of the Indxx Global Robotics and Artificial Intelligence Thematic Index (IBOTZNT).

Why It's Important

“The index that UBOT tracks aims to reflect the rapidly shifting landscape toward the precision and cost advantages that automation provides by including exposure to companies creating the systems, hardware and software with the greatest potential of eliminating the need for humans,” said Direxion in a recent note. “Among companies like Mitsubishi Electric (7 percent of the index) and the multinational Fanuc Corporation (6.44 percent), which specialize in all aspects of automation, there are other companies included in the index that have certain specializations across a spectrum of other fields.”

The AI and robotics theme has plenty of long-term tailwinds, but UBOT is a short-term instrument. Still, traders embracing the leveraged robotics fund have some potential near-term catalysts to consider. On a technical basis, if the fund cracks $15, it could rapidly deliver more upside and although UBOT has nearly doubled on a year-to-date basis, it would need to gain another 41 percent to reclaim its 52-week high.

There is evidence some traders are warming to UBOT. Last week brought a series of high volume days in the leveraged robotics ETF and turnover in the fund on Tuesday, another up day, was above-average.

What's Next

The robotics industry is sprawling, but UBOT's index captures much of the opportunity set available in this fast-growing niche.

“Related fields such as factory automation and system optimization, which aim to make the robotic factory floor as efficient as possible are also part of the index,” according to Direxion. “Keyence Corporation (OTC: KYCCF), the largest component of the index at 7.44 percent, caters almost exclusively to the broad and seemingly endless market of defining new productivity analytics and synthesizing solutions for gauging and improving an increasingly mechanized workflow.”

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